AviancaTaca will become Avianca next year, integrating seven airlines in Latin America. Meanwhile, it is now bidding to buy Portugal's flag carrier TAP. (Photo: AviancaTaca)

Wednesday, December 12, 2012

Special Reports

Company of the Year: AviancaTaca

Latinvex selects AviancaTaca as Company of the Year for its impressive results in 2012 and strong future outlook.

BY JOACHIM BAMRUD

What a year it has been for AviancaTaca, the holding company for airlines in Colombia, Peru, Ecuador, El Salvador, Costa Rica and Guatemala.

While 2012 results won’t be ready until next year, it is expected to see another strong year, both in revenues and profits. During the first three quarters this year, AviancaTaca boosted net income by 28.3 percent to 172.7 billion Colombian pesos (US$95.9 million), while revenues reached 5.6 trillion pesos (US$3.1 billion), an increase of 10.8 percent from the same period last year.

That compares with revenues of 7 trillion Colombian pesos (US$3.9 billion) during all of last year, which was an increase of 32.8 percent from 2010. Profits nearly doubled – from 110.0 billion pesos in 2010 to 202.2 billion pesos last year.

During the first ten months this year, passenger traffic grew 13.6 percent to 19.1 million. That’s nearly as much as it carried during all of last year: 20.8 million passengers.

And last week, Brazil-based Synergy – the company that controls AviancaTaca – made an offer to buy Portugal’s flag carrier TAP. If its offer is accepted by Portugal’s government, it will be the first instance of a company in a former colony buying the flag carrier of the former ruler, according to Bloomberg.

The deal will enable Avianca’s Brazil unit to expand its domestic and international traffic significantly. "Tap and Avianca Brazil are a wonderful complement to each other," Synergy board member Jose Efromovich told The Wall Street Journal. "A lot, not to say 100 percent, of what Tap has today can be used by us."

Avianca Taca is considered one of the best airlines in Latin America in terms of fleet quality, passenger service and financials. It is also a leader in e-commerce. This year it received its second e-commerce award since 2010 from the Peru-based Latin American E-Commerce Institute.

A DECADE AFTER

Avianca has come a long way since Brazilian-Bolivian businessman German Efromovich bought it in 2004, a year after it filed for bankruptcy in 2003. The airline, which turned 93 last week, was the first carrier on the American continent and is the second-oldest in the world in continuous operations (initiating only two months after Dutch flag carrier KLM).

However, after years of mismanagement Avianca faced massive losses and many experts predicted it would close. The turnaround at Avianca has made Efromovich something of a hero in Colombia and then-president Alvaro Uribe bestowed upon him Colombian citizenship in 2005.

He already held Brazilian citizenship after growing up there as a child when his parents moved from Bolivia. His parents, in turn, were Polish immigrants and last month Efromovich became a Polish citizen in a move aimed at securing European Union approval for Synergy’s bid for TAP.

AviancaTaca is the main rival of LATAM, the holding of Chile’s LAN and Brazil’s TAM, the largest airline in the region in revenues.

MORE PLANES, MORE FLIGHTS

In September AviancaTaca received a new Airbus A330-200, just the latest addition to its modern fleet of 62 aircraft, mostly Airbus, but also 12 from Embraer and 10 from Fokker.

“Avianca and Taca have one of the most modern fleets in Latin America, with an average age of five years,” Rafael Alonso, executive vice president for Latin America and the Caribbean for Airbus, said in a statement announcing the latest delivery.

The fleet expansion is necessary for AviancaTaca’s increase in routes and flights. Since Colombia-based Avianca announced that it was merging with El Salvador-based Taca in October 2009, the new holding AviancaTaca has launched 45 new routes, boosting capacity by 37 percent.

Next week, it is increasing the number of flights between Colombia and destinations in the United States, South America and the Caribbean. In the United States, it will add a third daily flight from Bogota to Miami starting December 16. The next day, Avianca will launch a new direct flight from Bogota to Orlando and expand to two the number of daily flights from Bogota to New York.

Avianca is also offering four flights per week from Bogota to Punta Cana in the Dominican Republic, the largest airport in the Caribbean. It is also starting a new direct flight between Bogota and Dominican capital Santo Domingo as well as four weekly flights linking Bogota to Cuban capital Havana.

In South America, AviancaTaca is scheduled to launch a direct flight between Bogota and Rio de Janeiro as well as a daily flight to Bolivian capital La Paz. Earlier this year it launched five new services, linking Lima with Cali and Medellin in Colombia; San Salvador with Cali and Quito and Bogota with the Colombian city of Yopal. It also expanded existing routes with more flights.

UNIFIED BRAND

Meanwhile, AviancaTaca is taking another major step next year, when the seven airlines that form part of its holding will all use the same brand, Avianca.

Many observers expected that this would be the logical move after Avianca merged with TACA in 2010 (the deal was announced in October 2009 but implemented in February 2010). However, the company decided to take a careful look at the impact of such a move. It finally opted for the one-brand solution after an “exhaustive market research and analysis,” according to the company. Helping it with the research was US-based brand researcher Lippincott, which also advised United Airlines and Continental on their brands after they merged (United became the sole brand).

“According to the results of the analysis, the history, market value and positioning of the Avinaca brand, makes it the best option to project and promote the products and services of AviancaTaca Holding SA,” the holding company said in a statement in October.

“The companies of the holding have registered highly satisfactory results in local and international markets, as well as in client satisfaction, which has resulted in their strength and positive economic results,” AviancaTaca CEO Fabio Villegas said in a statement.

OUTLOOKAviancaTaca has a solid outlook. Passenger traffic is expected to grow substantially as a result of the new routes opened this year and expansion of existing ones. Meanwhile, a TAP purchase by Synergy will clearly boost Avianca’s traffic in Brazil.

Thanks to the profesional management led by Villegas, who at one point was Colombia’s vice president, and the vision and persistence of Efromovich, AviancaTaca is expected to see another strong financial and operational year in 2012 and provide a solid basis for growth during the next five years.

As a result of its impressive results this year, Latinvex has selected AviancaTaca as Company of the Year.